Outline of Recent SEC Enforcement Actions - the Utah State Bar

than $480,000 from this scheme. Neither the company nor any other officer was charged in the
complaint.
Without admitting or denying guilt, Ray consented to the entry of an order that (i)
permanently enjoins him from future violations of Sections 10(b), 13(b)(5), and 16(a) of the
Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13b2-1, and 16a-3
thereunder, and aiding and abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and
14(a) of the Exchange Act and Rules 12b-20, 13a-13, and 14a-9 thereunder; (ii) requires him to
pay $540,651.58 in disgorgement and interest and a civil penalty of $50,000; and (iii) bars him
from serving as an officer or director of a public company for five years.
SEC v. Take-Two Interactive Software, Inc.
Lit. Rel. No. 20982 (April 1, 2009)
Accounting and Auditing Rel. No. 2957 (April 1, 2009)
http://sec.gov/litigation/litreleases/2009/lr20982.htm
The SEC filed of a civil action against video and computer game publisher and distributor
Take-Two Interactive Software, Inc. ("Take-Two"), alleging that during a seven year period,
Take-Two defrauded investors by granting backdated, undisclosed "in the money" stock options
to officers, directors, and key employees while failing to record required non-cash charges for
option-related compensation expenses.
The complaint alleges that on over 100 occasions from 1997 through September 2003,
Take-Two looked back and picked grant dates for the Company's incentive stock options,
resulting in grants of "in-the-money" options. According to the Complaint, Take-Two used
several means to backdate options, including pre-priced option pools, backdating of employment
agreements, and "pick-a-date" backdating, whereby a set exercise price for the grants was
chosen, and then a past grant date was selected when Take-Two's stock price most closely
corresponded to the set exercise price. On at least 26 occasions, the backdated grant dates
coincided with dates of historically low annual and quarterly closing prices for Take-Two's
common stock. These "fortuitous" grant dates, the complaint alleges, could not have been
selected so consistently without the benefit of hindsight. According to the complaint, Take-Two
granted these options without complying with its own stock option plans and, generally, without
the Board or a Committee thereof approving the grant dates or exercise prices. Take-Two
officers and employees allegedly prepared documents falsely indicating that the option grants
had been made on earlier dates when Take-Two's stock price had closed lower.
Without admitting or denying the allegations, Take-Two consented to the entry of an
order: (1) permanently enjoining it from violating Section 17(a) of the Securities Act of 1933,
Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 14(a) of the Securities Exchange Act of 1934
(Exchange Act) and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13 and 14a-9; and
(2) requiring it to pay a $3 million civil penalty.
The SEC previously settled with former Chief Executive Officer and Chairman Ryan
Brant for his alleged role as the architect of the fraudulent options backdating scheme. In that
action, Brant was permanently enjoined from violating and/or aiding and abetting violations of
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